Top Startup CEO Uses 10-Tier Plan To Keep Employees From Fighting Over Salaries And Demanding Raises

Marc LoreQuidsi
Marc Lore sold his last startup, Quidsi, to Amazon for more than $500 million. He's working on a new Amazon-like company, Jet.com, and he's implementing some unique management tactics.

Lore, who just raised $80 million for a discount-heavy e-commerce shop, doesn't have a desk. Instead he has a locker where he stores his computer and roams around the four Jet.com buildings in Montclair, NJ. There are already more than 100 people working for the startup, which recently launched in closed beta for friends and family members to test.

Lore posts every board presentation online for his employees to see. He also is open when talking about employee stock options. He gave a company-wide presentation about the difference between preferred and common stock, what Jet.com's financial structure it is, and how to calculate what stock options are worth.

Business Insider visited Lore in Montclair on Friday and discussed what he's building and how he's keeping top talent — many of his employees are former Quidsi people — happy. To maintain a strong company culture, Lore enforces three core values: transparency, trust and fairness.

Lore believes he's implemented a sure-fire way to keep employees from bickering about salaries, getting jealous of coworkers, and demanding raises. He's created ten levels of salaries and titles, ranging from lower-level associates to associate directors, directors, vice presidents, SVPs and C-levels. Every person that's recruited to work for Jet.com is assigned to one of the ten levels based on work experience and assigned the corresponding salary and stock option grants. Lore and his four executives determine every candidate's fate, so there's no salary negotiation ever. You either accept that pay level or decline. The only way to make more is to get promoted to the next tier.

Jet.com's office in Montclair, NJ. The company is moving its headquarters to Hoboken, NJ in April.
Business Insider
For example, a person with seven years of work experience would likely fall into the mid-level "Associate Director" tier, which earns a $125,000 salary and is granted 27,500 stock options.

Tech hires at Jet.com have a different pay range than the business and sales side. But both use the same ten-tier tactic. This management strategy is used by a few larger companies, namely banks.

On occasion, Lore's team has gotten the level wrong and quickly bumped an employee up to the next pay tier. Lore did this to one candidate who accepted a job at Jet.com but hadn't started yet. The person was pleasantly surprised to learn they'd be making tens of thousands more than they had initially agreed to.

What happens if Jet.com accidentally places an employee at a pay-tier that's too high? Lore says he and his executives are trying to figure that out right now. They'll either have to have a tough conversation and bring that person down a notch (at which point the person may get angry and walk) or they'll have to keep that person at the same level for a long time, while peers get promoted around them (also not fun).

And what happens when an employee comes to Jet with a higher offer from another firm? If Lore abides by his ten-tier system, he won't be allowed to make a counter offer. Lore says in that situation, he'd let the candidate walk, although he admits it will be hard to stomach for some of his top talent.